An eagle-eyed reader in Guernsey (thanks, Guy) was perusing the FCA’s recent Final Notice on the Bank of Beirut, and spotted this in paragraph 2.8: “The [FCA] therefore imposes on Bank of Beirut: (1) [a fine]; and (2) a restriction for a period of 126 days, in respect of its regulated activities only, that Bank of Beirut may not acquire new customers that are resident or incorporated in high risk jurisdictions. For the purposes of this restriction only, high risk jurisdictions are defined as countries which have a score of 60 or below in Transparency International’s Corruption Perceptions Index.” Whoa, Nelly, as Ms Furtado would say. Is this the FCA determining for us which jurisdictions are high risk (albeit “for the purposes of this restriction only”)?

Now, we went around this block last year, didn’t we? In summer 2014, the FCA suddenly published – and then just as suddenly removed – their own list of high risk jurisdictions. (You can read our deliberations here.) The problems with such an approach are manifold. The FCA is only one of the UK’s regulators – so should the other regulators adopt the same list? And should such a list be published anyway, given that businesses in the regulated sector are told over and over that the risk-based approach – including the determination of high risk jurisdictions – should be undertaken in-house, based on their own exposure to ML/TF risk, and not adopted off-the-shelf? And if the expectation is in fact that all businesses should use the same list of high risk jurisdictions rather than creating their own, then surely that list should be referred to in the legislation, and (given that we do have a fragmented regulatory regime here in the UK) published and maintained by a government agency rather than just one regulator? Do you see me sitting on my high horse, rolling my eyes and smacking my forehead in exasperation? It’s quite an ask, and I may fall off.

I don’t know if you can conclude too much form this one action in isolation, you’d need several incidents. The wording “for the purposes of this restriction only” gives them wiggle room to impose a different standard in a different case (higher or lower depending on how bad the bank’s previous approach was?) and therefor allow the claim that they are still permitting a risk based approach. Now if they always use the precise definition.

My comparison point is ASBO’s, Serious Crime Prevention Orders and a raft of other (hopefully post conviction) judicial orders that law enforcement can apply for*. While there are some standard conditions in each one, they can also have unique conditions to match the circumstances.

I can understand the seeming lure of having government maintain the list of high risk jurisdictions but I think that given how slow HM Government can be to adapt or update information (in my experience) using another accepted list

My biggest complaint is I am not sure that (with respect to them) Transparency International are the best source of data for determining a order.

I think we’re basically in agreement, Robert, on the dangers of using just one source to create a high risk status – even one as well-respected as Transparency International. Your comment about how nimble governments can be (or not) when it comes to updating lists is a very valid one. It also reminds me to wonder whether a government department might be more swayed by political negotiations (“we’ll put you on our list of good countries if you put us on yours…”).
Best wishes from Susan

Politics are inescapable danger even with all the vaunted talk of independence. It can be difficult for a public sector (or pseudo-public sector) to resist policy interventions by government even when we know we should. I think worrying about undue influence on regulator, especially in the ML arena would be a valid concern.

I meant to add that I don’t quite always approve some of the orders Law enforcement bodies can now apply for, I find myself questioning the morality of being able to gain what amounts to criminal restraints on citizens at the civil burden of proof which so many of those orders amount to. That is what the * in the above was going to refer to.
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